September 16, 2014 Volume XL, Issue VII & VIII Liberty Global plc Nasdaq: LBTYA, LBTYB, LBTYK Dow Jones Indus: 17,131.97 S&P 500: 1,998.98 Russell 2000: 1,150.97 Trigger: No Index Component: NA Type of Situation: Business Value, Consumer Franchise Price (LBTYK): $ 41.98 Shares Outstanding (MM): 779 Fully Diluted (MM) (% Increase): 829 (6%) Average Daily Volume (MM): 3.4 Market Cap (MM): $ 33,063 Enterprise Value (MM): $ 74,513 Percentage Closely Held: John Malone 3% econ., 28% voting 52-Week High/Low: $ 45.98/38.27 Trailing Twelve Months Price/Earnings: NM Price/Stated Book Value: 2.9x Long-Term Debt (MM): $ 40,739 Introduction Implied Upside to Estimate of Liberty Global plc (“Liberty Global,” “Liberty,” Intrinsic Value: 37% “LGI” or the “Company”) is the largest international Dividend: NA operator of cable systems with 24.5 million unique Payout NA customers. Under the direction of cable pioneer John Malone, Liberty Global has grown from a holding Yield NA company with investments in independent global cable Net Revenue Per Share: and programming at the time of its separation from TTM $ 19.36 Liberty Media in 2004 into the largest operator of cable 2013 $ NA systems in Europe. This has been accomplished 2012 $ NA through several reasonably-priced acquisitions that 2011 $ NA produced increasingly large synergies through network co-location, sales/marketing and central office sharing, Earnings Per Share: and capex savings, among other benefits. TTM $ NA Today, Liberty is the #1 operator in 9 of the 12 2013 $ NA countries or territories it operates in and has invested 2012 $ NA heavily to maintain best in class broadband network 2011 $ NA speeds and advanced video offerings. As a result, we Fiscal Year Ends: December 31 believe Liberty Global is best positioned to capitalize on 38 Hans Crescent long term tailwinds in Europe where Internet and pay Company Address: London, SW1X 0LZ TV penetration is still in a much less mature stage than United Kingdom in the U.S. Recent acquisitions and regulatory changes Telephone: 44 20 7190 6449 have also positioned the Company to develop a large CEO/President: Michael T. Fries business to business division and to introduce mobile Clients of Boyar Asset Management, Inc. do not own shares of Liberty services across its footprint (as a virtual network Global plc common stock. provider responsible for customer relationships). The Analysts employed by Boyar’s Intrinsic Value Research LLC own Company’s scale and maturing network are also shares of Liberty Global plc common stock. translating to growing EBITDA margins combined - 65 - Liberty Global plc with declining capital intensity. With sharply lower average cost of debt in recent years, the Company’s free cash flow profile continues to expand. This plays perfectly into John Malone’s leveraged return on equity philosophy, which has enabled the Company to simultaneously spend an average of greater than $1 billion per year on share repurchases and pursue transformative acquisitions without significantly increasing leverage. Going forward, we project revenue growth slows from 5% historically to ~3.5% per annum while EBITDA margins stabilize near current levels. Placing a 9x EV/EBITDA multiple on 2017 projections, our intrinsic value estimate is approximately $58 per share for Liberty Global, implying 37% upside from current levels. Additional upside could come from stronger than expected revenue growth or margin expansion, accretive capital deployment, a successful spinoff and expansion strategy of the Latin America business, or even an eventual sale of the Company to a larger telecom provider. History Liberty Global chairman and former engineer John Malone of “Cable Cowboy” fame was the key figure in building Tele-Communications Inc. (TCI), which was a small debt-burdened upstart cable operator when he joined Texas investor Bob Magness’ company in 1972. Mr. Malone had built TCI into the second largest U.S. cable provider by subscribers by the time he orchestrated its sale to AT&T for $59 billion in March 1999. As part of the deal, a separate AT&T Liberty Media Group tracking stock was created to house the numerous cable programming properties and other investments across the technology, media, and telecom sectors that TCI had built over the years. Approximately $5.5 billion in cash was also allocated to Liberty. Liberty Media already had a long history as a tracking stock under the TCI umbrella and Liberty remained under the control of John Malone and other former TCI/Liberty executives/directors following the TCI sale. Liberty Media was formally separated from AT&T into an independent company (Liberty Media Corp.) in August 2001 with John Malone retaining effective voting control through Class B shares and a complex voting arrangement with the Bob Magness estate. Although TCI was sold at a healthy valuation at the peak of the market, Malone would later go on to express regret in exiting the U.S. broadband business. Malone and Liberty were more or less handcuffed from re-entering the U.S. cable industry due to regulatory complications given Liberty’s wide range of TV programming and satellite TV investments including an eventual controlling stake in DirecTV. Several spin-offs, in particular DirecTV in November 2009, finally freed Malone and co. to reenter the industry and they did so via Liberty Media’s investments in Charter Communications beginning in 2013. In the interim, Liberty faced fewer regulatory restrictions in the European cable industry (although still running into some regional regulatory challenges over the years). Malone and co. saw an attractive opportunity to re-execute the TCI playbook of sorts there given Europe’s less mature, more fragmented cable market. At the time of the separation from AT&T in 2001, Liberty Media already held several stakes in international cable distribution and content properties. This included a minority stake in UnitedGlobalCom (UGC), then the largest broadband communications provider outside the U.S. with operations in 23 countries. UGC held cable assets in Australia and Latin America as well as a controlling interest in United Pan-Europe Communications NV, or UPC, then a leading European cable network provider with 7 million subscribers across 17 countries. The Liberty Media spinoff also included a 25% equity stake in UK cable television systems and TV programming company Telewest and a minority stake in IDT’s international telecom services business. The late 1990s produced a massive debt-fueled telecom/cable infrastructure bubble not only in the U.S. but also globally. Although Liberty Media was not entirely unaffected by the bubble’s aftermath, the spinoff allowed Liberty to capitalize on the distressed markets to make some strategic investments. Most prominently, Liberty acquired a majority of UGC equity in early 2002 through a debt-for-equity recapitalization. However, the Telewest investment did not fare as well. After writing off its equity stake that was once worth in excess of $3 billion, the Company tried to combine highly indebted Telewest and its UK cable competitor NTL but faced stiff opposition from NTL bondholders. Liberty eventually sold its remaining 7.5% stake following Telewest’s recapitalization in 2004, only to miss the 2006 merger with NTL and Virgin Mobile to form what would be renamed Virgin Media. Liberty also failed to close a deal for debt burdened Deutsche Telecom’s cable assets in 2002 in large part due to disagreements with German regulators over stringent cable systems upgrade requirements. - 66 - Liberty Global plc In June 2004, the predecessor to Liberty Global was separated from the broader Liberty empire via a tax free spinoff incorporated as Liberty Media International. The spinoff and the associated rights offering gave Malone and Liberty shareholders a separate stock currency to better facilitate further investment opportunities in the European cable industry. At the time, LMI’s primary asset was still its stake in UnitedGlobalCom (which Liberty had increased to 53% equity and 90% voting), which at that point included the UPC Broadband European cable assets, the Chellomedia programming business, and Chilean broadband provider VTR as well as some smaller assets. UPC also acquired French operator Noos for €567 million in July 2004 to create the #1 cable operator in the country, but Liberty divested the business two years later. In partnership with Microsoft and Sumitomo, LMI also held a 45% stake in leading Japanese cable network service provider Jupiter Telecom (J-COM) and a 50% stake in Japanese TV programming affiliate Jupiter Programming (JPC). LMI also retained Liberty Media’s Latin American cable assets including leading Puerto Rican cable operator Liberty Cablevision of Puerto Rico and a stake in Argentine operator Cablevisión SA. In June 2005, Liberty Media exercised its controlling stake in UnitedGlobalCom to simplify the capital structure by merging the two companies into a new entity named Liberty Global, Inc. (LGI) via a primarily stock- based transaction. LGI continued to opportunistically acquire European assets, including Swiss operator Cablecom for $2.2 billion in October 2005, cable properties in the Czech Republic for $420 million in 2006, and a majority of Belgian cable company Telenet via multiple transactions between 2005-2007. Liberty Global’s acquisition streak moderated over the next couple years as the global recession froze the capital markets, but the Company continued to grow revenue and operating cash flow as broadband and digital cable adoption continued unabated and the Company tightened expense controls. However, the acquisition lull did not last long. Liberty Global entered Germany with a purpose, assembling the #2 German cable company through the acquisition of Unitymedia GmbH for $2.8 billion in cash ($5.7 billion including debt assumption) in January 2010 and the acquisition of Kabel BW Musketeer for $1.4 billion cash ($3.1 billion including debt) in December 2011.